Poll: Excess savings and risk tolerance

[SecondCor521]

In the modestly possible scenario that something like this happens in about 5 years, I would recommend putting the money that you didn't know you would have into a money market account for about six months before you do anything with it. People say that it is usually not best to make major decisions right after major things happen in life, and I agree with that too. So, at least at first you would have a more conservative AA due to it all being in MM. Don't buy a new house or other major purchase right away until you have settled down for a few months. During that time, you can work hard on fleshing out the details of your new investment plan, and working on any emotional or interpersonal issues that the money brings with it. Ultimately I suspect you will find that the money doesn't really change your lifestyle, so much as easing it a little and making it more worry-free.

W2R,

Thanks, yes, that is my tentative plan.

2Cor521

 

[Alan]

I like the concept of "marginal utility of wealth" as described by Swedroe in one of his book. Basically, once you have accumulated enough to cover your needs, any incremental increase in wealth becomes less and less significant. Therefore the need to take risk decreases. The hard part is figuring out when enough is enough...

Totally agree. Was it not Gaucho Marks (who had all his wealth in CD's) that was asked the question "Do you think CD's are a good hedge against inflation?"

His reply was "Yes, if you have enough of them!"

 

[REWahoo]

Totally agree. Was it not Gaucho Marks (who had all his wealth in CD's) that was asked the question "Do you think CD's are a good hedge against inflation?"

His reply was "Yes, if you have enough of them!"

I believe it was Treasuries, not CD's...and I also am pretty sure it was Groucho Marx, not a South American cowboy with a similar last name.

 

[Alan]

I believe it was Treasuries, not CD's...and I also am pretty sure it was Groucho Marx, not a South American cowboy with a similar last name.

Thanks for correcting me - heavens knows what I'll be like be in 20 years.

 

[haha]

Imagine the following hypothetical scenario:

You have been saving diligently for retirement for many years and are now 49 years old. You've done the calculations and they show you are on track to retire and meet your financial goals at age 50, which is just dandy fine with you because age 50 meshes well with your life plans.

One day, you look at your calculations and realize that they are off by a factor of two to your benefit: instead of being able to retire at 50 with $X million, you'll be able to retire at age 50 with $2X million.

Setting aside the question of whether or not to retire immediately, the question I wonder about is this:

How would you change your investment allocation after having this realization?

2Cor521

I would decide to keep working, as I clearly lacked the basic cognitive skills to survive without a paycheck.

Ha

 

[ziggy29]

I believe it was Treasuries, not CD's...and I also am pretty sure it was Groucho Marx, not a South American cowboy with a similar last name.

Groucho Marx? What does a crotchety, grumpy Communist have to do with any of this?

 

[Alan]

Groucho Marx? What does a crotchety, grumpy Communist have to do with any of this?

I believe the communists (ie China) hold about $3 trillion worth of US treasuries today so they are still doing it

 

[atlas888]

I like the concept of "marginal utility of wealth" as described by Swedroe in one of his book. Basically, once you have accumulated enough to cover your needs, any incremental increase in wealth becomes less and less significant. Therefore the need to take risk decreases. The hard part is figuring out when enough is enough...

For some, money is just a way of keeping score ( though I suspect not too many of them frequent the FIRE Board ). The accumulation of money, love conquest, wardrobes, cars, private jets is more a primal thing and not based on utility and need. To them, the term excess does not exist.

 

[NW-Bound]

Here are some wisecracks from good ole Groucho Marx.

I wish you'd keep my hands to yourself.

Women should be obscene and not heard.

A man's only as old as the woman he feels.

Anyone who says he can see through women is missing a lot.

We took pictures of the native girls, but they weren't developed. . . But we're going back next year.

How do you feel about women's rights ? I like either side of them.

Whoever called it necking was a poor judge of anatomy.
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